Abstract

A recent and widely received study by Lauren Cohen, Umit G. Gurun, and Scott Duke Kominers finds that non-practicing entities (NPEs) — pejoratively known as “patent trolls” — are “opportunistic” because they target defendants that (1) are cash-rich (particularly compared to practicing entity patentees), (2) operate in industries that “have nothing to do with the patent” in suit, (3) are staffed by small legal teams, and (4) are busy with numerous non-IP cases. Additionally, the authors conclude that defendants that lose in patent litigation with NPEs on average have marked declines in subsequent R & D expenditures, on the order of $200 million per year. On this basis, the authors suggest “the marginal policy response should be to more carefully limit the power of NPEs.” Here, I critique in detail the August 2014 version of this study. (Given the authors' ongoing revisions to their study, I plan to revise the critique following the study's final publication.) I conclude that although the authors’ project is admirable in attempting to comprehensively examine the litigation behavior of NPEs, their dataset is incomplete and unrepresentative, their theoretical model is flawed, and their empirical models are unsound. As such, neither their findings nor policy prescriptions are justified.

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